FIRB Regime Reform Part I: Removal of Exemption
Updated: Feb 19
This article summarises the exemptions and relevant amendments under the FIRB Regime.
The Australian Government passed a new legislation which has kicked in from 1st January 2021 to amend the administration of foreign investment laws (i.e. FIRB (Foreign Investment Review Board) Regime). As the Government continues to release guidance notes on the new rules in the coming months, here is what is known thus far.
FIRB Approval and Exemptions
Prior to the amendment, a foreign person may be required to seek approval from the ATO (Australian Taxation Office) in relation to a property purchase in Australia. There are some exemptions under this framework:
Acquisition by will or devolution by way of law (devolution is explained below) of an interest in securities, assets, a trust or Australian land (s 29 of the Foreign Acquisitions and Takeovers Regulation 2015 (“Regulation”);
Direct or indirect acquisition of an interest in Australian land by an Australian citizen who is not ordinarily a resident in Australia (s 35(1)); and
Direct or indirect acquisition of an interest in residential land by a foreign person who is a holder of a permanent or special category visa (s 38(2)).
Definition of “Foreign Person”
The common misconception is that Australian citizens are not considered foreign persons under the FIRB Regime. According to the Foreign Acquisitions and Takeovers Act 1975 (“Act”), a foreign person is an Australian citizen or any person who has lived in Australia for at least 200 days in the 12 months prior to a property purchase date. A foreign person can be an individual, a corporation, a partner in a limited partnership, a trustee or any other entity that meets the prescribed criteria.
Amendment: Removal of Exemption of Acquisition by Will
One of the changes to the Regime is that s 29 of the Regulation no longer exempts an acquisition by will of an interest, assets, a trust or Australian land. Any such acquisition is likely to require approval from the FIRB.
Devolution means the involuntary passing of property from one person to another by way of law. For example, a devolution is most common in estate administration where an estate is vested in the executor or administrator. While such devolution is still exempt under the Regulation, the distribution of estate from the executor/administrator to beneficiary is no longer so.